India Lowers Solar Tariffs? A "Double-Edged Sword" for Promoting Domestic PV Manufacturing [SMM Analysis]

In the recent 2025-2026 federal budget speech, Finance Minister Nirmala Sitharaman proposed adjustments to tariffs on solar cells and modules under tariff heading 8541.

Specifically, the tariff on solar cells will be reduced from 25% to 20%, but an additional 7.5% Agricultural Infrastructure and Development Cess (AIDC) and 2.5% Social Welfare Surcharge (SWS) will be imposed. The tariff on solar modules will be reduced from 40% to 20%, with an additional 20% AIDC and 4% SWS. This tariff adjustment is expected to promote further development of India's clean technology manufacturing and solar industry.

The tariff reduction is likely to lower the cost of importing modules, enabling local developers to procure cheaper modules from countries like China. To protect domestic manufacturing, the government mandates the use of domestically produced modules for government and public projects through the "Approved List of Models and Manufacturers (ALMM)" mechanism. Starting June 1, 2026, this mechanism will be extended to the solar cell sector.

One of the key focuses of this budget is to promote the "Make in India" strategy. Finance Minister Sitharaman announced the launch of the National Manufacturing Promotion Scheme, which will prioritize support for clean technology manufacturing. She stated: "The scheme aims to enhance domestic value addition and industry chain development in areas such as solar cells, EV batteries, motor controllers, electrolyzers, wind turbines, ultra-high voltage transmission equipment, and grid-scale ESS batteries."

The total allocation for the renewable energy sector is 265.49 billion rupees (approximately $3.05 billion), marking a significant increase from 191 billion rupees in the 2024-2025 fiscal year. Of this, PV projects will receive 242.24 billion rupees (approximately $2.78 billion). Additionally, the government has allocated 200 billion rupees (approximately $2.3 billion) for rooftop PV subsidies under the "Prime Minister's Free Electricity Scheme."

Notably, India is simultaneously advancing its nuclear energy development, setting a target of achieving 100 GW of installed capacity under the "2047 Vision Nuclear Energy Program." Sitharaman emphasized that this is of strategic importance to the nation's energy transition.